General Motors (NYSE:GM) announced a 5.2% increase in its fourth-quarter net income, reaching $2.1 billion compared to the previous year. During the period from October to December, the North American car manufacturer recorded revenues of US$42.9 billion, a slight reduction of 0.3% compared to the same quarter in 2022.

Mary Barra, CEO of GM, expressed confidence in the company’s position to achieve solid financial performance next year, building on the successes and learnings of 2023.

In annual terms, GM saw its profit rise to US$10.1 billion, marking a growth of 1.9% over 2022. The company’s revenues also showed a significant increase of 9.6% throughout the year, totaling US$ $171.8 billion.

Shares jumped on Tuesday after the company gave investors an optimistic outlook for 2024 and signaled that more capital will be returned to shareholders.

“Consensus is growing that the U.S. economy, job market and auto sales will continue to be resilient,” GM Chief Executive Mary Barra told investors in a letter. GM expects to reduce outstanding shares to less than 1 billion, down from about 1.2 billion currently and 1.6 billion at its post-IPO peak, Barra said.

GM shares rose 8.7% in early trading.

Barra highlighted measures to return cash to shareholders, including $12 billion in 2023 through a $10 billion share buyback and a 33% dividend increase.

“We are prioritizing the return of money to our shareholders,” said Barra. GM’s forecast for 2024 calls for $8 billion to $10 billion in free cash flow, almost all of it generated by GM’s internal combustion engine, or ICE, vehicles.

“The ICE machine is working again… please go to the end of the hall and fill your buckets!” Evercore ISI analyst Chris McNally wrote in a note.

GM is pinning hopes on strong demand for its combustion trucks and SUVs in North America, cost savings and increased sales of its new generation of electric vehicles after 2023 deliveries fell short of previous plans. GM expects overall EV sales to increase this year to 10% of the U.S. market from 7% in 2023.

However, Barra said GM will launch plug-in hybrid vehicles in North America, moving away from the strategy of bypassing hybrid engines in that market. U.S. sales of hybrids have been rising as consumers balk at high electric vehicle prices and charging infrastructure challenges.
“We know the EV market is not going to grow linearly,” CFO Paul Jacobson told analysts. “We are prepared to make ICE and EV production more flexible.”

CRUISE DRIVE, CHINA POSE CHALLENGES

Analysts questioned Barra about possible changes to GM’s electric and autonomous vehicle strategies, as well as declining sales in China.
“We will not shy away from making difficult decisions” to protect profitability, Barra said. “Nothing is off the table.”

GM will postpone a planned March investor day until later this year “because of the significant changes underway at GM and Cruise,” Barra said. GM also wants more time to resolve software development issues that forced the company to stop selling its new Chevrolet Blazer EV.

GM expects its electric vehicle operations to begin generating variable profits in the second half of the year, Jacobson said.

Adjusted pre-tax profits for 2024 are forecast at $12 billion to $14 billion, compared with $12.4 billion reported for 2023. GM will keep capital spending roughly flat.

The 2024 forecast translates to somewhere between $8.50 and $9.50 per share, compared to $7.68 in 2023. Fewer shares due to buybacks add $1.45 per share to the forecast. This will be offset by higher taxes and interest payments.

Cost reduction will play an important role in meeting forecasts as GM expects vehicle prices to fall. GM plans to cut $400 million in marketing spending, on top of last year’s $500 million cut, Jacobson said. Engineers cut $200 million in product development costs, Barra said.

In the fourth quarter, GM reported that net income rose 5.2% to $2.1 billion on revenue of $43 billion. Adjusted pre-tax profit fell 54% to $1.8 billion. The reduction reflected the impact of last fall’s United Auto Workers strikes, higher costs at Cruise and a $1.1 billion writedown related to electric vehicle battery cells held in inventory, the company said.

Spending on the troubled Cruise robo-taxi unit will be cut by $1 billion. Cruise halted operations after one of

its self-driving cars dragged a woman down a San Francisco street.

Barra said GM will “refocus and relaunch Cruise,” without disclosing a timeline. Cruise lost $2.7 billion in 2023, not including $500 million in restructuring costs incurred in the fourth quarter when the unit cut staff.

Separately, GM faces increasing challenges in China, once its biggest market. Domestic automakers and Tesla are gaining share with electrified vehicles, new infotainment technologies and aggressive price cuts. GM expects to post a loss in China in the current quarter, Jacobson said.

“We have a lot of inventory that we are working through in the first quarter” in China, he said.